Through the sale of the Illawarra Metallurgical Coal operation, South32 intends to streamline its portfolio to concentrate on the company's operating positions and growth options in the aluminium value chain, manganese, and base metals
Australia-based South32 to sell the Illawarra Metallurgical Coal operation in NSW to an entity owned by GEAR and M Resources. (Credit: South32)
Mining and metals company South32 has agreed to divest the Illawarra Metallurgical Coal operation in New South Wales (NSW), Australia to an entity owned by Golden Energy and Resources (GEAR) and M Resources in a deal worth up to $1.65bn.
The consideration includes $1.05bn in upfront cash payable at the completion of the deal, $250m deferred cash payable in 2030, and contingent price-linked cash not exceeding $350m.
Upon completion of the transaction, the buyer will take over economic and operational authority of Illawarra Metallurgical Coal, encompassing both existing and forthcoming obligations.
Through the sale of the Illawarra Metallurgical Coal operation, South32 aims to streamline its portfolio to concentrate on the company’s operating positions and growth options in the aluminium value chain, manganese, and base metals.
The deal is also expected to bolster the mining and metals company’s balance sheet and release capital to inject into its high-quality development projects in copper and zinc.
Besides, the divestiture is said to decrease South32’s capital intensity, with the Illawarra Metallurgical Coal operation comprising approximately 35% of group capital expenditure.
Located in the Illawarra and Macarthur regions of the southern coalfields, the Illawarra Metallurgical Coal operations comprise underground mines at Appin and Dendrobium.
The underground mines produce hard coking coal for steelmaking and as a by-product the company supplies small quantities of energy coal.
South32 CEO Graham Kerr said: “Illawarra Metallurgical Coal produces high-quality metallurgical coal, a key ingredient in the production of steel, which will be required until low-carbon steel becomes economically viable on a commercial scale.
“GEAR and M Resources are established participants in the Australian metallurgical coal industry, with a strong commitment to environmental and safety standards, who are well positioned to continue Illawarra Metallurgical Coal’s contribution to the local steel industry and the Illawarra and Macarthur regions.
“Our focus remains the safe and reliable operation of Illawarra Metallurgical Coal. Over the coming months we will work with the Buyer, our workforce, the local community, government, customers and suppliers to support a successful transition of ownership.”
The transaction is contingent upon certain conditions including approval from the Australian Foreign Investment Review Board (FIRB) and customary regulatory approvals.
It is also subject to the waiver or non-exercise of pre-emption rights held by BlueScope Steel (AIS) Proprietary in line with a coal supply agreement that it has with Illawarra Metallurgical Coal.
Following the satisfaction of all conditions, the divestiture is anticipated to be completed in the first half of the financial year 2025.
If BlueScope exercises its pre-emption rights, the deal will not proceed. Instead, South32 will sell the Illawarra Metallurgical Coal to BlueScope on the same commercial terms and conditions as agreed with the entity owned by GEAR and M Resources.